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Law360 (April 2, 2020, 4:36 PM EDT) --
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| Kelly Belnick |
The DPA's stated goal was to tap into America's "productive ability," "the greatest in the world," by giving the federal government the ability to focus production efforts where needed most.[2] On March 24, the Trump administration formally triggered the DPA, through Federal Emergency Management Agency Administrator Peter Gaynor, securing 60,000 coronavirus test kits.
The original 1950 law was designed to balance the absolute need to protect national security through mandated (or strongly urged) manufacturing increases — economic conscription, if you will — against the understandable financial and legal concerns of private, typically autonomous, corporations.
An obvious concern of any manufacturing business is risk exposure. Without government support, such businesses are confronted with competing conundrums: Will refocusing production result in unacceptable loss elsewhere? Years from now, will unknown product dangers arise where it is claimed the manufacturer knew or should have known of health hazards?
In a time of great uncertainty, it is encouraging and emblematic of America's entrepreneurial spirit to hear of private company partnerships addressing critical coronavirus supply shortages. This is happening with no government incentives — just a basic human sense of responsibility.
The corporate response is emerging from industry giants like General Motors Co., General Electric Co. and Ford Motor Co.; small businesses like Eight Oaks Distillery in New Tripoli, Pennsylvania (that shifted a bourbon run into hand sanitizer production), and Washington, D.C., rental supply company Something Vintage (which transformed party supplies into materials to make medical masks); as well as Seattle startups like Ventec Life Systems (ramping up production of the smallest portable ventilator with GM's support).
Nevertheless, protections for responding manufacturers are not guaranteed. The DPA and other wartime measures by the federal government serve important purposes. Today their use will assure required tools to end this pandemic are generated and disseminated in rapid fashion. Long after this "war" is over, these federal measures will also afford manufacturers — the private actors who supplied and stockpiled our hospitals and healthcare providers — a modicum of legal safety against a morass of tort litigation.
In activating the DPA, Gaynor noted the administration was using the "allocation portion." The allocation portion of the DPA, or Title 50 U.S. Code Section 4501(a), "Allocation of materials, services, and facilities," authorizes the president to (1) prioritize performance of contracts necessary to promote national security and (2) allocate material in such a manner as he deems "necessary or appropriate" to promote national security.[3]
There are other highly useful DPA mechanisms at the president's disposal, which could further aid the national coronavirus response and ramp up manufacture of essential items, like ventilators, viral swabs and N95 respirators. The DPA's Title III authorities allow the president to incentivize the domestic industrial base to expand production and supply of critical materials and goods.[4]
Authorized incentives may include loans, loan guarantees, direct purchases, purchase commitments and the authority to procure and install equipment in private industrial facilities to expand their productive capacity.[5] Exercising this power also incentivizes critical resource production by cloaking target industries with legal defenses usually limited to government officers — thus enabling corporations to raise the government contract defense.
The U.S. Supreme Court, in Boyle v. United Technologies Corp.,[6] reiterated the long recognized federal interest in shielding federal agents from tort liability. This has been extended to private government contractors performing their obligations pursuant to government procurement contracts and "acting under" federal agents.
In Boyle, the Supreme Court reasoned, "[i]t makes little sense to insulate the Government against financial liability for the judgment that a particular feature of … equipment is necessary when the Government produces the equipment itself, but not when it contracts for the production." While this defense may be extended to private manufacturers, it is not an absolute defense or a complete immunity shield.
There are liability immunity provisions in Section 4557 of the DPA, but whether or not these extend to products liability claims is uncertain.[7] Judge Jack Weinstein briefly examined the issue in In re Agent Orange Product Liability Litigation,[8] reasoning that it was unlikely Congress intended for the DPA immunity provisions to bar all tort suits and were probably limited to breach of contract claims. In dicta, in In re Aircraft Crash Litigation Frederick, Maryland,[9], Judge Walter Rice reiterated that no case holds DPA immunity extends to third parties' tort claims.
Another potential source of legal protection for coronavirus product manufacturers is the Public Readiness and Emergency Preparedness Act, or PREP.[10] On March 10, the U.S. Department of Health and Human Services issued a declaration under PREP, protecting makers, distributors, program planners and administering entities of coronavirus countermeasures from liability.
PREP was previously deployed to respond to ebola, zika and anthrax. The immunity provisions under PREP are far-reaching, but their applicability is quite limited.[11] PREP also contains a liability exception providing individuals with an exclusive federal cause of action for death or serious physical injury "proximately caused by willful misconduct."[12] PREP defines "willful misconduct" as a "standard for liability that is more stringent than a standard of negligence in any form or recklessness."
When a declaration is issued pursuant to PREP, the secretary of HHS must delineate the activities for which PREP liability immunity is in effect.[13] The HHS has yet to release covered coronavirus countermeasures. The HHS generally advises that approved or unapproved drugs, biological products or devices may be covered by immunity for liability. For example, during the zika outbreak, the HHS secretary identified "vaccines, and all devices and their constituent components used in the administration of these vaccines," as the only covered countermeasures.
In the days, weeks and months ahead Congress will likely pass multiple packages to deliver coronavirus relief and pass policies to stimulate the economy. Private manufacturers of all sizes will continue to answer the call of governors and top health officials to repurpose production lines in order to rapidly churn out products and supplies required to stop the virus. It is critical, if not essential, to pause and consider what could happen in the years and decades to come if tort claim immunity is left an open-ended question for these actors.
Kelly A. Belnick is an associate at Tanenbaum Keale LLP.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] Radio and Television Address to the American People Following the Signing of the Defense Production Act. Last accessed on March 23, 2020, at https://www.presidency.ucsb.edu/documents/radio-and-television-address-the-american-people-following-the-signing-the-defense.
[2] Id.
[3] 50 U.S.C.A § 4511(a)
[4] 50 U.S.C.A §§ 4533(a)-(e)
[5] Id.
[6] Boyle v. United Technologies Corp.
, 487 U.S. 500 (1988).[7] 50 U.S.C.A § 4557
[8] In re Agent Orange Product Liability Litigation
, 597 F. Supp. 740 (EDNY 1984).[9] In re Aircraft Crash Litigation Frederick, Md.
, May 6, 1981, 752 F. Supp 1326 (SDOH 1990).[10] 42 U.S.C.A § 247d-6d.
[11] 42 U.S.C.A § 246d-6d(a)(1).
[12] 42 U.S.C.A § 246d-6e(a)-(b).
[13] 42 U.S.C.A § 246d-6d(b).
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